PropTech: Property Technology, the New Frontier of Real Estate, Part 1: Introduction
In this 3-part series, we take a look at the concept of PropTech, its impact, benefits and challenges.
What is PropTech and why is it important?
Technology and its rate of change continue to be a major disruptor in all industries, including industrial, commercial and residential real estate spaces. Property related technology, commonly referred to as ‘PropTech’, exists at the intersection of real estate and technology, and finds innovative opportunities for technology to improve the experience and function of the real estate industry, to both at the transactional level and with regard to the provision of related support services. This somewhat nebulous concept of PropTech is quickly becoming a goal of entrepreneurs and investors to claim ownership of the term, and overlaps with other start-up-related industries, such as “contech” (technology used in l construction industry) and fintech (technology used in the financial sector), as well as smart buildings and smart cities. Real estate being the largest asset class in the world, it is only a matter of time before this ecosystem is disrupted by the implementation of the technology.
PropTech supporters identify gaps and inefficiencies in the real estate market and related industries, and insert highly innovative, technology-driven solutions into sectors traditionally resistant to change, such as buying and leasing, management, appraisal, financing and construction. PropTech offers new market opportunities to companies operating in the real estate sector, including modernizing and increasing the efficiency of real estate development projects, reinventing product and service offerings and developing applications, software and other data analytics to streamline real estate initiatives. Private Equity and VC investors are taking note, as investments in this area have grown exponentially in recent years. For example, PropTech startups in Canada, such as Sonder and ecobee, have raised $ 698 million and $ 203 million respectively from various funding sources. In order to take advantage of this new opportunity, those who wish to engage with PropTech will first want to know what it is, its impact on the market and the associated risks.
What is the impact of PropTech on the market?
PropTech is fundamentally changing the way we interact with the physical world around us, whether at home, at work, or in public spaces. Here are examples of how the integration of PropTech is disrupting the market:
- During COVID-19, homeowners became concerned about the air quality in buildings. Poppy, “the world’s premier commercial pathogen detection and detection network” has established itself and provided virus monitoring services to building management. Technology applied to real estate has provided a solution to a modern health problem.
- Fundever’s digital platform provides the space to connect mortgage brokers with commercial lenders, creating a “unified digital market for commercial real estate”.
- Other companies engaged in PropTech projects are looking to become the ‘Uber’ of real estate, trying to find the services most people need, such as buying a home and making it more accessible and transparent.
The agile nature of start-ups offers a competitive advantage across all industries, due to their ability to innovate and radically rethink existing systems. COVID-19 has accelerated the speed of technology adoption – what was once a ‘good to have’ is now essential for continued functionality. The needs of businesses are reassessed and evolve, at the same time as the needs and wants of consumers increase and change. While it is currently difficult to imagine a disruption of the real estate market on the developer side, through the use of data analytics, blockchain and virtual reality, the way we do business in this industry could be radically different in the next 5 to 10 years.